Bitcoin pipes

Bitcoin’s dubious utility value

Bitcoin fanbois point to bitcoin’s utility as a payment network. But, unlike Visa, holders of bitcoin don’t get any of the mining revenues, so there is no revenue stream on which to value a bitcoin.
 
Participants do need to have bitcoin to transfer funds, but they don’t need to hold it for longer than the transaction itself. Since bitcoin is limited to ~3 transactions per second, and average confirmation times are several hours, depending on network congestion, there is no need for more than a few bitcoin to accomplish all payments across the network. As an example, assuming 1 bitcoin per transaction, 3/sec * 3,600 sec/hr * 3 hr/confirmation = 32,400 bitcoin to execute all payments on the network.
 
Also, since bitcoin can be divided into satoshi, hundreds of millionths of a Bitcoin, there is no need to hold a particular amount of bitcoin to accomplish a transaction. The bitcoin itself just represents the transaction record, not the value of the contract, just as a record in Visa’s database represents the transaction, and is not in and of itself valuable, beyond the market price of the transaction mechanism (about 1%).
 
Even if holders of bitcoin shared in the mining revenues, the competitive mining market produces a flat fee per transaction, not a percentage fee, which allows the transfer of massive fortunes for a tiny fraction of a percent. It would be a much worse value proposition, for investors, than Visa.
 
The fiat price of a bitcoin arises from an artificial restriction on bitcoin supply & mining, and people’s expectation that these restrictions will entice others to buy their bitcoin in the future at a higher price. The “greater fool” theory. But this is separate from bitcoin’s utility as a payment network.
 
It is no different from other speculative phenomena such as Beanie Babies, baseball cards, and other artificially restricted commodities. People misinterpret the restriction as an ipso facto justification for a high price. Once all available cash & credit has poured into the commodity, there are no further buyers, the mania ends, and the price drops to the utility value of the commodity.  In bitcoin’s case, its utility value is close to zero.
Tether collapse scenario hindenberg style

Tether collapse scenario

Current situation with dumb money buying BTC:

  • Tether prints tethers to buy bitcoin
  • BTC-USDT price skyrockets
  • Arbitrage bots buy BTC-USD, because everyone assumes 1 USDT = 1 USD
  • BTC-USD price matches BTC-USDT price
  • Price increase brings in more dumb money USD to buy BTC, skyrocketing price further
  • Arbitrage bots sell BTC for USD, profit
  • Tether sells BTC for USD
  • Tether is now “backed” by USD — can afford to redeem tethers for the small number of people who convert USDT to USD
  • Tether pockets USD, prints more tethers …

What if the flow of dumb money slows down or stops? (due to higher prices, and simply no more mattress cash to dump into BTC)

  • Tether prints tethers to buy bitcoin
  • BTC-USDT price skyrockets
  • Arbitrage bots buy BTC-USD
  • No more dumb money = no more USD arbitrage profit
  • Less arbitrage = increasing gap between BTC-USDT and BTC-USD prices
  • Now there is arbitrage opportunity the other direction
  • Buy BTC-USD, sell BTC-USDT, sell USDT for USD
  • Tether now has to redeem tethers for USD
  • The bigger the gap, the more tethers they have to redeem
  • If they stop printing tethers, the BTC-USDT price collapses
  • If BTC-USDT price collapses, arbitrage bots buy BTC-USDT and sell BTC-USD, further collapsing BTC-USD
  • If they keep printing, the gap widens and they have to redeem more and more tethers for USD
  • At that point, the game is up and Tether will have no incentive to continue redeeming tethers.  The tether market collapses.  You can redeem 1 USDT for 1 cent.  BTC paper profits are wiped out.  Tether is left with >600 million USD in the bank.

The phenomena to watch out for in this scenario are:

  • Increasing gap between BTC-USDT and BTC-USD prices
  • Increasing volatility of USDT-USD price, followed by collapse
constitution burns

End the founding myth

What made this nation great was not the constitution imposed on it or the fake revolution against British rule. It was the relative lack of rule from 150 years before the revolution, as compared to the European monarchies, and the cultural traditions that grew from that.

The constitution failed, the revolution failed, and all they accomplished was the steady growth of despotic government that Americans originally hated. There never should have been a “United States”. In fact, if the Americans had gone down the path of liberty, the British would not have been able to stop them anyway. Their hold on the colonies was already tenuous.

This enduring myth that the revolution and constitution created liberty is the foundational error of American political consciousness. They were a step backward for liberty. Yet American conservatives, and some libertarians, fall on the crutch of the constitution, like ideological cripples. The myth must be exposed and rejected. It is the only way to accept responsibility for figuring out how to achieve liberty.

extortion and secession

Secession misses the point

Secession, as a means to anarchy, misses the point.
 
Peaceful secession is simply a rearrangement of the political structure to one that is more convenient for the ruling regime, either because it is more economically efficient, or reduces political tensions and makes it easier to rule. Either way, any temporary increase in liberty is allowed only because it ultimately results in more control for the elite.
 
Real secession, creation of a sovereign state, necessarily means war. It is the rejection of the existing authority.
 
Anarchy cannot be achieved by peaceful secession. It is the rejection of all authority. Leftists are power-mad and do not care about economic efficiency, other people’s views, or tolerance. They believe they are right and want to kill their evil enemies. They will not “live and let live”, because that is precisely their attitude in the existing regime. Peaceful secession from a leftist regime is a performative contradiction.
 
The only way we will achieve liberty is by removing the tools of power from leftists and any other power-hungry psychopaths. This potentially could be achieved by many means, such as getting a majority of people on the side of liberty, to remove democratic power from the elite. But no leftist state will tolerate an independent anarchist regime anywhere in their sphere of control (they won’t even leave Iraq alone!).
 
The only way to achieve separation is by war.

Bitcoin’s paper price bump

What’s behind Bitcoin’s recent price increase? I’ll tell you — and it’s not Bitcoin’s utility as a currency, or wonderful investment opportunity.
 
Bitfinex accounts for the largest share of BTC trading volume. Yet they stopped accepting USD deposits back in April. This inevitably spilled into restricting USD withdrawals.  After that, BTC price on their exchange went up. Why?
 
If you were an account holder, what would you do? I’m not able to withdraw my USD. Therefore, I’ll buy BTC so I can move it to another wallet. Hence, increased demand for BTC on their exchange, and increased price AND volume.
 
Other exchanges did the same; there are not many that allow USD deposits & withdrawals now.
 
This recent BTC price increase is caused by the fact that no one can withdraw USD!
What happens when this bottled-up demand to withdraw finally moves into USD, other fiat, or other crypto?
Updated on 10/20/2017 to reflect USD withdrawal restrictions and supporting link.

Alt-coins are vulnerable to attack

The strength of a cryptocurrency is the share of global processing power it can muster in service of its ledger.  An attack by a significant computational resource (botnet, mining pool, government supercomputer, etc.) could potentially reverse recent transactions or cause a fork of the currency.  The reason the global share matters is that computational power is fungible, and may be used in service of any cryptocurrency.

The less computational power dedicated to mining a crypto, the more vulnerable it is to attack.  Alt-coins that do not command as much hash power as Bitcoin would be first in line.

Processing power over time is governed by the price per computational unit and by the price of electricity.  For example, a spike in electricity prices or transistor prices would increase mining costs, and therefore transaction fees, possibly disrupting the usability of the currency.  A sudden drop in electricity prices or transistor prices would reduce mining costs, increasing the chance of attacks on a currency’s ledger.

Such attacks could be orchestrated, not necessarily to steal the underlying wealth of currency holders, but to accomplish secondary effects beneficial to the attacker.  For example:

  • A large investor in a particular crypto may attack a competing (smaller) crypto intruding in the space.  This implies a first-mover advantage in the cryptocurrency space and stratification of crypto, with one per defensible economic niche.  Eventually, the market may consolidate into one global crypto.
  • Momentarily disrupt the functioning of a crypto at a critical moment in its development, for maximum PR effect, to spread fear & uncertainty to potential investors and adopters.
  • Momentarily disrupt recent transactions to create uncertainty for retailers accepting the currency & consumers using it.
  • Permanently disrupt or fork a smaller currency.

You would only need to bid on computing power for a short time to cause a major disruption.  Miners are very sensitive to transaction fees, so would quickly respond to any change in market demand.  Furthermore, cloud mining operations, and cloud computing in general, provide an easy way to quickly spool up computing power for a short time, disrupt the target crypto, and spool down, thus minimizing costs.

Alt-coins based on a permissionless, global blockchain are very vulnerable to this type of attack. Eventually, even Bitcoin itself may come under attack should there be a revolutionary development in computational hardware, exploited by a group of early adopters, or a government willing to throw massive fiat to kill it once and for all.

Liberty pioneers, showing the way through the economic wilderness

Liberty pioneers: showing the world how to live without government

Libertarians living off tax money is unethical, but it’s an even bigger practical problem. It shows that living without the government teat is impossible, that living on theft is the only way. It is philosophically damaging to the idea of a voluntary society. It is also bad marketing to people who ask questions like “who will build the roads?”

There will never be a day when we simply “get rid of government”, such that everything is perfectly free. This is because no one wants to be the first to give up their government goodies. Just as unilateral free trade is better than mutual protectionism, unilateral voluntarism is better than mutual theft. We can only ever get rid of government by showing, in practical terms, how to make a living without it.

Is it difficult? Extremely! Will it mean less money and fewer opportunities than working for the government? Yes! That is the price of advancing liberty. Many people are not up to the task. But then don’t blow hot air about liberty, if you are unwilling to do what is required to bring it about. It reeks of hypocrisy. The pioneers of liberty are the ones who show how to make a living, or even be rich, without stolen tax money. If they show the way, others will follow, simply because it’s in their self-interest. And isn’t that what we say motivates people, rather than abstract principles that contradict their daily reality?

Receiving tax money is theft

Ethics of receiving government money

I had a couple of objections to my argument that living off the government is unethical.

First, if accepting a government wage is unethical, then using the roads must also be unethical.

But this is not the case if one uses the net tax payer vs. net tax taker standard.  Using the roads is simply redeeming what was stolen from me.  Earning a government wage is 100% theft.

What about using the roads without having paid any taxes?  Should the government compel this person to pay taxes in order to justify using the roads?

If one looks at the road as just a pile of stolen money, the ethical way to remedy a theft is to split the money proportionally to what was stolen, and return the money to the victims.  Since the road cannot be split physically, its use may be split, effectively as usage vouchers, for the expected lifetime of the road that was built from that theft.  In other words, privatized.

The person who infringes on the use of the road without having had anything stolen in the first place, is infringing on the usage of the people who were stolen from.  He would be responsible for compensating those privatized owners, not for paying new taxes, i.e. new thefts committed against him.

This standard is consistent with not accepting any of the government’s stolen loot, unless, and only in the amount that, one was stolen from.

A corollary objection is, doesn’t this imply a need for government borders, since illegals use roads without having paid taxes?

Punishing people collectively is not justified, just because they are foreigners.  Furthermore, no one has commited any violations prior to crossing the border, so no a priori punishment is justified.  Many end up working and having money stolen from them.  However, any who do receive more from the government than was stolen from, are also stealing, the same as Americans who do so.  So, there is no categorical difference between Americans and foreigners.  No national border is justified, any more than any arbitrary border within the country.

The second objection is, while it may be unethical to provide services to the government in exchange for stolen money, it is okay to simply receive the money, as in Social Security payments.

If someone steals your car, you can justly recover your car, since you hold the rightful title.  If they steal your car and give it to a friend, you can also justly recover your car from their friend, since they do not have any rightful claim on it.  It is unethical for the robber’s friend to receive the stolen car.

Similarly, it is unethical to accept stolen money, since the victims have a right to have their money returned, from the money handed out by the government.

Birds flying to freedom

Human nature: liberty or tyranny?

If liberty is human nature, then we should see humanity in a state of liberty.  It is not in a state of liberty, but one of tyranny, or one of mixed liberty and tyranny.  Either tyranny must be an aberration or human nature is not purely suited to liberty.

If tyranny is an aberration, a result of historical circumstance, or a particular person or institution, then eliminating the aberrant factor should let humanity resume liberty.  History has shown eliminating the source of tyranny usually leads to a replacement tyranny, oftentimes greater than the original.

Any state, or center of power, gravitates towards greater tyranny over time, until a crisis, and rearrangement of affairs.

Outside the scope of the state, humans gravitate towards liberty, by the pursuit of their desires, by the creation of new forms and methods, by the discovery of new places and avenues.

As groups, humans vacillate between tyranny and liberty, often advancing both at once.

As individuals, humans pursue their own liberty, yet accept tyranny over others, and over themselves, as a price of liberty.

Lowering the price of liberty, easing the pursuit of one’s own ends, makes the individual less accepting of tyranny.

Increasing the price of tyranny makes the individual want to escape, and accept liberty, even if costly.

Liberty is the pursuit of one’s own ends.  Tyranny is opposing another’s pursuit of their own ends.

Liberty and tyranny are attitudes.  The more one is concerned with their own pursuits, the less they are likely to tyrannize.  The more one is concerned with others’ pursuits, the more likely they are to tyrannize.

The key to pursuing liberty as an end in itself is to shift people’s focus to themselves rather than others.

Humans look to control others for some end they value.  Their own end, or that of another’s: a god, a king, a state.

If all humans wanted to control others for their own ends, no control would be possible, since it would be nullified in its symmetric pursuit among all humans.  Tyranny can only arise by the desire to control for the sake of another.

The mysteries of existence and creation are fashioned into religion.  Human virtue and honor are fashioned into a king.  Organization and security are fashioned into a state.

The very things that humans value are fashioned into the means of their enslavement.  Tyranny is the pursuit of goodness by evil means.

Liberty is the pursuit of one’s ends by one’s own means.

Clearing land for farming

Blood and Soil and Woods

Right after Jeff Deist’s controversial talk at Mises U, and amidst intense backlash from libertarians, Tom Woods jumped to defend Deist on his podcast.  What’s funny is that he plays the entirety of Deist’s speech, yet ignores most of what he said, and ignores legitimate criticisms of it.  Instead, he mounts an irrelevant defense of Ron Paul and the Mises Institute and labels anyone who asks questions as “leftists” and “virtue-signallers”.

Let’s get this out of the way: Jeff Deist’s use of the phrase “Blood and Soil” is categorically Nazi symbolism.  Jeff Deist is not a Nazi or a fascist, but the phrase is.  Given the context of his appeal to “nationalist and cultural alliances”, it is legimitate to question this choice.  This is not a leftist criticism; it is a libertarian criticism based on individual rights.  At the very least, it is a terrible branding move for the president of the Mises Institute.

Blut und Boden (Blood and Soil)

“Blood and Soil” (German: Blut und Boden)

Tom brushes off this bizarre choice of words as no big deal.  He actually says it’s the same thing as using the idiom “if you want to make an omlette, you gotta break some eggs“.  Yeah, because most Americans casually talk about “blood and soil” at the water cooler.  (Or maybe casual fascist rallies.)

Then he says that the phrase originated with Oswald Spengler and before that, German Romantics.  Well, nobody said the Nazis were original.  Obviously they drew on strains of thought that preceded them, including the famous Nazi salute, which was originally the American “Bellamy salute“, and even further back, the “Roman salute“.  I guess Tom wouldn’t blink if Jeff ended his speech with a good ole fashioned American “Bellamy salute”.

Bellamy salute

“Bellamy salute”, an American original

Do I really need to point out that the Nazis popularized a few ideas, including “Blood and Soil”, which they used extensively in their propaganda materials?  It’s like saying the swastika was really a mystical symbol in ancient India, so you’re silly to think it’s a Nazi symbol!  Let’s put that mystical symbol in the Mises Institute logo, only “leftists” and “virtue-signallers” will complain.

Even ignoring the Nazi history of “Blood and Soil”, what does this phrase really mean?  It’s certainly not about individual freedom.  If it was, you’d simply say “individual freedom”.  No, this is a call for genetic and geographic collectivism.  For “us” versus “them”.  For the “right” kind of people versus the “wrong” kind of people.  Maybe some people care about “blood and soil”, but what the heck does this have to do with libertarianism?

Tom’s interpretation of it is: “What’s meant here is that there are people, probably a majority of mankind, for whom place and kin still matter.  And that maybe we should take this into account in what we’re doing.”

Oh.  How should “we” take this into account?   What are “we” doing, that “we” should take this into account?  Tom is remarkably vague here, which only lends credence to suggestions that maybe Jeff’s speech, and his supporters apologias, are dog whistles and code words for an undisclosed agenda.  I mean really, what is Tom talking about here?  We’re forced to wonder.

It’s funny that neither Tom nor Jeff mention the Number One issue that has split the libertarian movement since Trump’s election.  You know, the issue that has caused a big chunk of libertarians to shift to the alt-right, or even to outright “anarcho-fascism”.  A little issue you might have heard of.   The BORDER WALL ….???   You know, the whole bit about government seizing private property to build a prison wall along the border and use violent force against peaceful people exercising their freedom of movement?   Because the socialist foreigners coming in will vote in more socialism and prevent the formation of a libertarian utopia?  I dunno, just thinking it might have something to do with Jeff’s speech.

Border wall

Border wall (keeping them out, or keeping us in?)

This seems to be an attempt to win back the alt-right libertarians.  But, it’s a short-sighted strategy.  The alt-right is not, and never will be, interested in libertarian ideas.  They are interested in power and winning, group identity, and “ends justifies the means” thinking (helicopter libertarians).  Not exactly fertile ground for individual liberty.

Tom mentions this inconsistency as an argument for why Jeff’s speech was obviously not an appeal to the alt-right.  But he misunderstands the alt-right.  It is not strictly Nazi, in the sense of political conditions of Germany in the 1930s.  But, it shares the same racial collectivist mindset and willingness to use state power.  Tom says the alt-right is against decentralization, even favoring the EU (!), whereas the alt-right clearly favored Brexit and favors nationalist secession movements in Europe and the US.  The Nazis were militaristic, yet the alt-right seems anti-war, going so far as to criticize Trump for bombing Syria.  So, there is some clear overlap with Jeff’s call for “nationalist and cultural alliances”, which he may hope to use to build the libertarian movement.

Tom ignores this possibility.  Maybe he feels he’s defending a good friend, which is admirable.  Unfortunately, friendship can lead to blind spots that prevent objective assessment.  Regarding libertarian ideals, Tom is under the impression that “[Jeff] says these are universal values and rights that we believe in”.  Yet Jeff argued the exact opposite, that “universalism is not natural law; in fact it is often directly at odds with human nature and (true) human diversity”.  Libertarianism is not available to all humans.  “Mecca is not Paris, an Irishman is not an Aboriginal, a Buddhist is not a Rastafarian, a soccer mom is not a Russian.”

Hans-Herman-Hoppe-helicopter-communist-anarchocapitalism

Hans Herman Hoppe watches as libertarians drop leftists out of helicopters.

Tom further misunderstands the reality of today’s movement by saying that libertarians are too focused on “transgender rights in Saudi Arabia” and “handing out US constitutions in Iraq“.  Is he for real?  How many libertarians are concerned about those things?  Yet he does not mention the one single issue that has divided libertarians this year more than anything else.

Jeff’s speech is the continuation of a disturbing trend in the libertarian movement, away from ethical principles, and towards expediency.  Many of these alt-right libertarians, or bordertarians, or libert-aryans, or helicopterians, or Hoppeans, or whatever term you use, think that libertarianism is an end, not a means.  It is the beautiful, crystalline utopia that will be achieved after an era of power and bloodshed.  It is the naive delusion of all revolutionary creeds.  It is the antithesis of what it means to be a libertarian and the betrayal of all the good work that Ron Paul, Jeff Deist, and Tom Woods have done over the years.  That’s why Jeff’s speech was so disappointing and why it’s alarming that there was so little opposition to it from the Mises Institute community.